When trading intraday breakouts, or when engaging in any type of trading, for that matter, it is important for traders to use every type of advantage possible. We want to search for situations in which the odds are in our favor and then take action.

Breakouts falls into three general type; real breakout, false breakout and pre mature breakout. A real breakout is spotted by an upward or downward movement of the price in a more convincing fashion. That is to be said, it is represented by either a long white or black candlestick or better, a marubozu. This is what we called candlestick attitude.

A false breakout occurs when the price appears to break below support or above resistance, only to rise back above support or fall back below resistance. A premature breakout is somehow between this two breakouts. First it break the support/resistance level, then it rise/fall back to the levels, only to continue its breakout direction back.

In trading the market, consolidation patterns exists in many forms such as:

Consolidation Patterns Diagram

For today's purpose, I shall explain the ascending and descending triangles patterns.

Ascending and Descending Triangles

These two patterns create excellent intraday breakout opportunities, because the pattern itself establishesa directional bias for the currency or commodities pair.

An ascending triangle is formed by a combination of diagonal support and horizontal resistance. The diagonal support is drawn by using the trendline tool.

Ascending Triangle

In the case of this pattern, the bulls are gaining strength and buying at higher and higher levels, while the bears are merely trying to defend an established level of resistance. Since the bulls are more aggresive than the bears, they are more likely to prevail in this battle. The odds favor a breakout to the upside.

A descending triangle on the other hand is formed by a combination of diagonal resistance and horizontal support.

Descending triangle

In the case of this pattern, the bears are gaining strength and selling at lower and lower levels, while the bulls are merely trying to defend an established level of support. The bears are the more aggresive party in this case, so the odds favor a breakout to the downside.

Trend filter

When trading these patterns, traders can gain a further edge by:

Checking the direction of the currency pair prior to the formation of the triangle pattern;

The time of the day filter.

On top of that, to be able to understand the buildup before the breakout would be essential in forecasting the breakout direction.